Be proactive, 'educate' the banks

The banking industry has to be more open in seeking knowledge about the franchise industry, says Ansa-House senior executive director

MALAYSIAN banks are not paying as much attention to the local franchise industry as it deserves, according to an international franchise consultant.

Ansa-House senior executive director Lene Rudbaek said franchisors and franchisees feel that the banking industry is "unwilling" to provide them with the right type of loan packages.

"Having said that, I have seen the same pattern in other countries around the world and learned that the franchise industry itself is the only one who can change this pattern by taking a proactive approach to educate banks and other financial institutions on all aspects of franchise financing and the needs of the industry," she said in a reply e-mail to Business Times.

Rudbaek and senior executive director Bill Robertson, who previously operated Ansa-House in Europe, have relocated the franchise consultancy firm to Kuala Lumpur as many of their clients are expanding into Asia.

Rudbaek said as franchising is mainly about constantly growing a business through chain operation, Malaysian franchisors who have found it hard to get bank financing for their projects, are trying to be self-financed and grow their business on day-to-day cash-flow balance.

"That makes them, in the early stage of their growth, financially weaker than franchisors from other parts of the world, especially in periods with unexpected low sales and income," she said.

Rudbaek also said that being self-financing on cash flow also makes many Malaysian franchisors growing much slower than needed.

They have to take short-term decisions regarding their business investments instead of looking into long-term investments for their expansion, she added.

Besides the franchise industry's role in educating the banks, the banking industry also has to be more open in seeking knowledge about the franchise industry.

"The banking industry needs to understand that when providing financial solutions to the franchise industry, franchisors require better terms than loans based on a 'dollar to dollar' principle," she said.

Rudbaek said Ansa-House had on several occasions, managed to get financial support for franchisors from the local banks although the specific business was not really performing.

"The banks are not unwilling to help franchisors in financial troubles, but need the management of the businesses and their consultants to identify the problem areas and show them how a possible loan can turn around a negative situation," she said.